Re: Uli Behringer of The Music Group Q&A
85 online patents
145 operations patents
249 desktop
xx peripherals
xxx portables and notebooks
xxx servers storage and networking
Patents | Dell
I'll take your word for it that they have 3000 patents. Here's a link if anyone wants to count em. I don't.
My suspicion is that Dell is nervous about their product designs walking out the side door of their factories over there, so they patented every geegaw and bracket they could to use as ammunition against copycats.
Dell has a remarkable business model, but for a slightly different reason IMO. They basically sell direct to end users via their website. 85 of their patents were for that end of their business. By using quick turn through their offshore factories and shipping from the far east, they can sell a computer and receive the payment literally before they start final assembly on that already sold computer. They statistically manage sub assemblies and peripherals, in queue to have the right amount of parts to satisfy sales and can change prices on the fly to manage those sales by raising prices on inventory moving too fast, or dropping prices on subassemblies selling too slow.
As you know most manufacturers don't gat paid, sometime for weeks after they deliver product and as much as months after buying parts and building product. So Dell had a near magical business model that didn't require borrowing capital to expand sales. His sales literally self-fund nearly unlimited internal growth. Of course it takes more than one good idea to dominate an industry that competitive and Dell has/had other issues.
[edit] Coincidentally, I just read in the newspaper about Dell buying another software company (Quest Software, $2.4B). Software is a much higher profit margin business than commodity computer hardware. IBM transformed itself from computer hardware to software and services decades ago. It looks like Dell for one, is not that in love with their old business model and trying to change. [/edit]
Note: Manufacturing a large number of SKUs that use common technology inside (similar pots switches, ICs, etc) allows for effective use of raw inventory, where long term forecasting can be done in the aggregate, with finer adjustments closer in. Vertical integration of more custom subassemblies can further relieve logistical management issues. Of course one needs to be careful to not become too reliant on short run capability and though line extension create so many models that you end up competing with yourself. This is the old lite-beer conundrum, where new sales come from your own existing products.
The concept of offshore manufacturing to reduce cost is hardly novel. CBS built Fender products over in japan back in the '60s. Marshal made gear in Korea and later India. Taiwan was a major offshore factory for many companies. As I like to inform the China haters, the US was the cheap offshore manufacturer for Europe Hundreds of years ago.
In my judgement before the last couple decades, the US MI industry was underdeveloped with inefficient distribution channels (small mom and pop music stores), and ineffective advertising (modest general brand positioning). I credit Greg Mackie with dragging the MI industry into consumer style advertising, where they ignore the dealer distribution channels and marketed product features directly to the end user, this hard sell created pre-sold consumer demand and reduced dealers to order takers. That worked very well for them for a while (remarkable growth in their early years), but their "made in USA" branding identity became a liability as consumer trends shifted to accept offshore manufacturing, when the price reduction was large enough (I estimate more than 20% cheaper is enough to make consumers forget where something is made). This is normal maturing of a market, that has happened before and will happen again in other markets.
If you want to take credit for pioneering in mainland China from the MI business, you can have it. CM in China have been servicing other major industries well before that but mainland China was playing catch up with Taiwan and more qualified PAC rim manufacturers. Mainland China was clearly cheaper, but you get what you pay for. You enjoyed a competitive advantage from that move that compelled others in the industry to ramp up their plans for mainland Chinese manufacturing.
Your stories of unsupervised CM do not sound that different from problems experienced using sub contractors at any significant distance. I recall how much of a PIA it was to keep a factory 25 miles away out of the ditches. Make that thousands of miles away with major language and cultural differences and the process control discipline becomes that much more critical.
Good luck with your expansion in China, and brand acquisitions of western badges... I heard rumors of a 100 piece AP analyzer buy. Perhaps ramping up digital mixer production (or just a rumor). i don't expect you to comment on here-say either. Lets hope China remains open to western business interests. The more trade we do with them, the less dangerous they are.
JR
85 online patents
145 operations patents
249 desktop
xx peripherals
xxx portables and notebooks
xxx servers storage and networking
Patents | Dell
I'll take your word for it that they have 3000 patents. Here's a link if anyone wants to count em. I don't.
My suspicion is that Dell is nervous about their product designs walking out the side door of their factories over there, so they patented every geegaw and bracket they could to use as ammunition against copycats.
Dell has a remarkable business model, but for a slightly different reason IMO. They basically sell direct to end users via their website. 85 of their patents were for that end of their business. By using quick turn through their offshore factories and shipping from the far east, they can sell a computer and receive the payment literally before they start final assembly on that already sold computer. They statistically manage sub assemblies and peripherals, in queue to have the right amount of parts to satisfy sales and can change prices on the fly to manage those sales by raising prices on inventory moving too fast, or dropping prices on subassemblies selling too slow.
As you know most manufacturers don't gat paid, sometime for weeks after they deliver product and as much as months after buying parts and building product. So Dell had a near magical business model that didn't require borrowing capital to expand sales. His sales literally self-fund nearly unlimited internal growth. Of course it takes more than one good idea to dominate an industry that competitive and Dell has/had other issues.
[edit] Coincidentally, I just read in the newspaper about Dell buying another software company (Quest Software, $2.4B). Software is a much higher profit margin business than commodity computer hardware. IBM transformed itself from computer hardware to software and services decades ago. It looks like Dell for one, is not that in love with their old business model and trying to change. [/edit]
Note: Manufacturing a large number of SKUs that use common technology inside (similar pots switches, ICs, etc) allows for effective use of raw inventory, where long term forecasting can be done in the aggregate, with finer adjustments closer in. Vertical integration of more custom subassemblies can further relieve logistical management issues. Of course one needs to be careful to not become too reliant on short run capability and though line extension create so many models that you end up competing with yourself. This is the old lite-beer conundrum, where new sales come from your own existing products.
The concept of offshore manufacturing to reduce cost is hardly novel. CBS built Fender products over in japan back in the '60s. Marshal made gear in Korea and later India. Taiwan was a major offshore factory for many companies. As I like to inform the China haters, the US was the cheap offshore manufacturer for Europe Hundreds of years ago.
In my judgement before the last couple decades, the US MI industry was underdeveloped with inefficient distribution channels (small mom and pop music stores), and ineffective advertising (modest general brand positioning). I credit Greg Mackie with dragging the MI industry into consumer style advertising, where they ignore the dealer distribution channels and marketed product features directly to the end user, this hard sell created pre-sold consumer demand and reduced dealers to order takers. That worked very well for them for a while (remarkable growth in their early years), but their "made in USA" branding identity became a liability as consumer trends shifted to accept offshore manufacturing, when the price reduction was large enough (I estimate more than 20% cheaper is enough to make consumers forget where something is made). This is normal maturing of a market, that has happened before and will happen again in other markets.
If you want to take credit for pioneering in mainland China from the MI business, you can have it. CM in China have been servicing other major industries well before that but mainland China was playing catch up with Taiwan and more qualified PAC rim manufacturers. Mainland China was clearly cheaper, but you get what you pay for. You enjoyed a competitive advantage from that move that compelled others in the industry to ramp up their plans for mainland Chinese manufacturing.
Your stories of unsupervised CM do not sound that different from problems experienced using sub contractors at any significant distance. I recall how much of a PIA it was to keep a factory 25 miles away out of the ditches. Make that thousands of miles away with major language and cultural differences and the process control discipline becomes that much more critical.
Good luck with your expansion in China, and brand acquisitions of western badges... I heard rumors of a 100 piece AP analyzer buy. Perhaps ramping up digital mixer production (or just a rumor). i don't expect you to comment on here-say either. Lets hope China remains open to western business interests. The more trade we do with them, the less dangerous they are.
JR
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